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5 trends and hurdles for the future of effective financial management

By
Jack Moore

All week long, as part of the Federal News Radio special report, "Rise
of the Money People," we've tracked best practices, key personalities
and new policies in the financial-management realm.

Today, we turn to the future, examining the three emerging trends that could help
federal agencies and their chief financial officers get a better grip on improving
their financial systems and the two significant hurdles that stand in their way.

The Office of Management and Budget made that clear last month when it issued a new final
policy mandating agencies use a federal shared-services provider when updating
their financial systems.

Too often, as agencies went about updating their accounting systems, their plans
to build costly new programs from the ground up ran over-budget and behind
schedule. OMB paused many agencies' modernization initiatives in the summer of
2010

The earlier approach simply isn't working, said Peggy Sherry,
the CFO of the Homeland Security Department.

"They take too long; they're too expensive. ... At the end of the day, they often
lead to results that are not what you intended especially as it relates to cost,
quality and performance," she said.

Sherry knows firsthand difficulties in modernization efforts.

Over the past few years, DHS twice tried and failed to consolidate 13 different accounting systems into a
single, all-encompassing system.

DHS has now opted for more incremental improvements to its financial-
management structure. Shared services is a "key element" of the agency's approach,
Sherry said.

"It really allows agencies to focus on our core competencies and missions,
ultimately creating value with taxpayer dollars where it was intended to be," she
said.

Still, some challenges persist.

When OMB first started recommending shared services, there was pushback in some
quarters from CFOs worried about losing their grip on their agency's portfolio.

But Sherry said attitudes are changing.

"Thinking has evolved," she said. "The way we really need to look at this is that
you're just purchasing the IT piece of it as a service."

TREND - Data driving decisions

For CFOs, high-quality data is vital, akin to "dial tone," said Clarence Crawford, leader of Deloitte's Federal
Financial Management Solutions Center and former CFO of the Office of Personnel
Management.

A smartphone that can't make a call, even if it's outfitted with all the bells
and whistles, is of little value, he said.

"Having the high-quality data is a first step, and I think a lot of agencies are
moving in that direction," he added.

"We spend an awful lot of money in the government, but we don't necessarily have a
way to be able to look across the portfolio at what that information is," Sherry
said. "We don't necessarily collect the data in a consistent manner. So, it's
challenging to be able to get quality information and then to be able to do
apples-to-apples comparisons."

Even within a single agency, there's often no easy way to find out what various
components or regions are paying for a particular service, she said.

The Office of Management and Budget is attempting to combat that lack of awareness
with what it calls the "prices-paid portal."

"It's a data warehouse for federal agencies to understand what we're paying for
stuff and what our colleagues are paying across government," said OMB Controller
Danny Werfel in a keynote address at the Association of Government Accountants summit in February. "It's putting into a single platform
information so that we can be smarter about what goods and services to the
government cost."

Getting a handle on that basic information will help power a broader inventory of
data about what the government owns, what it pays for services, and where agencies
can share resources and services, he explained.

"That's powerful information," Sherry said. "If we're able to figure out: What are
we paying within the agency? What are we paying across the government for the same
type of service? It then allows us to drive efficiency."

TREND - Expansion of the CFO role

From green eyeshade accountants to "master data analyzers," the role of
the CFO has evolved since the CFO Act codified the role in 1990.

Part of that transformation has been driven by an increasing cooperation and
stronger relationship between agency CFOs and their counterparts on the technology
side of the agency — the chief information officer.

The CIO community talks a lot about governance and best practice, Sherry said, two
key themes that CFOs can also take to heart.

The emerging reality is that "we are not going to be successful as a financial-
management community working in a vacuum," Werfel said in his AGA speech. "We have
to take a very integrative approach to managing our organizations and to being
successful."

But the CFO role is also broadening in and of itself, moving away from nuts-and-
bolts issues.

"If the head of the agency only gets numbers from you — the only thing you
can talk about are clean opinions and things of that nature — the agency may
be paying a little too much for the CFO," Crawford said he often tells agency
CFOs, only half jokingly.

The CFO role of the future is about high-level decision-making rooted in high-
quality data, he said.

HURDLE - Shrinking budgets

The biggest stormcloud on the horizon, as any CFO would say, remains the
budget.

Each year, budget pressures seem to grow more acute, Werfel said in his AGA
keynote address. "Obviously, this year, the budget uncertainty that we face is no
longer amorphous, it's become tangible and real," he said.

In an exclusive Federal News Radio survey of CFOs and deputy CFOs, sequestration (and the need to
find efficiencies to comply with the steep across-the-board cuts) ranked as CFOs'
top priority.

And financial-systems modernization, which is exceedingly complex and expensive,
is vulnerable to the budget pressure.

"Nowadays, in the sequester environment ... the ability to invest money in some of
these projects — that you know will save you money in the long run —
can also become a challenge for an agency," Sherry said.

For medium-sized agencies, the modernization effort could run them into the tens
of millions of dollars and take a year or more to actually implement, Crawford
said.

"I don't think there's going to be a lot of appetite on the Hill for funding a lot
of these initiatives," he said. "So I think they'll have to be a lot smarter about
what they do and how they do it."

HURDLE - Cultivating a workforce amid decline

As budgets are squeezed, federal employees are asked to take on ever greater
responsibility even as waves of retirements and early-outs have reduced staff
sizes.

But agency money people will also need to apply some old-fashioned leadership.
There are no cure-alls in the CFO toolbox.

Despite the difficulties, it is in just this type of budget environment that CFOs
can shine, by leveraging both new technologies and time-tested best practices.

"It's a very challenging time but there's no better time for the CFO community to
really demonstrate its true value add to the agencies, to the administration and
to the taxpayers of the nation," Crawford said.